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2000cc said:

In my opinion Japanese games havent fallen in quality at all this gen, Games like Nier and Atelier Meruru (and in my opinion FFXIII and XIII-2) are some of the best games to come out of Japan, ever, even the 'not the greatest' ones this gen like Xenoblade chronicles and Tales of Xilia are very good and far beyond the majority of old JRPGS,

Its just that the 'rest of world' market has shifted away from Japanese gaming, they dont make games in the fields that are popular at the moment, you are (hopefully) never going to see a Japanese call of duty or halo game and the western rpg market now craves open world wanderfests with minimal 'linear story' (read narrative & well developed characters)

In my opinion the height of the western RPG age was baldurs gate 2 shadows of amn (pc) and planescape:torment era, starting with neverwinter nights and morrowwind it has got itself into an almost unplayable state (literally (eg bugs) as well as figuratively)

but then I dont at all represent the target audience so my opinion is way off the norm there.

In short waht I'm saying is I think if you asjked a japanese gamer about this gens quality of jap games (in all genres) you would get a very different response to what most western gamers would give. When a style a particular country specialises in is 'out of fashion' currently its always easier to be harsher to their games, it'd be a bit like turning up to a black tie ball in a modern day 80's style dress, it may be considerably better than any and all dresses in the 80's but everyone will judge you hard if its not in with the current trend in that particular place/region/venue (sorry I'm more fluent in fashion than gaming, but thats my attempt at an elaboration)

Just my thoughts on the matter

The Japanese just dominated the market so long that people that really know a lot about the history of games expect Japan to continue the trend. That is just not realistic in a world where the competition is so much greater now. As you say times change and what is in changes, but the more interesting question is will Japan ever dominate in popularity again? I do not think so as it is a lot to ask from a very unique culture that really does not have a very high population. They stick to their style and still make good games, but they will never have a monopoly over the industry again. 

The Japanese will love their games the most as that is thier culture, and should be expected, but the same is true for the rest of the world. People are not harsher on here to Japanese games at all the games that take the most heat are the most popular ones, like Call of Duty, Halo, Uncharted, The Elder Scrolls, Gears (and Lady Gaga . People just like to complain about things when their style of anything does not conform with popular opinion. So what I am saying is you made a good point about people judging others harshly because your sexy dress is not the the most popular, but the opposite group of people will tell you the most common form of fasion is boring, and over used. In the end, both sides are doing the same thing and trying to tell others their way is the best. I think everyone has been guilty of that at one time or another.